- Residential real estate investment in Europe reached €59 billion in 2025, the highest annual total since 2023
- 96% of institutional investors plan to increase their exposure to residential assets
- Private Rented Sector / Build-to-Rent (PRS/BTR) is expected to be the best-performing segment in 2026
- The UK, Spain and Germany remain the main destination markets
- 82% of investors view sustainability as a strategic priority
Stronger performance in the residential sector, combined with rising institutional interest and a more stable macroeconomic environment, is restoring momentum to the European residential real estate market. This is one of the key conclusions of Cushman & Wakefield’s latest survey of European institutional investors.
In 2025, the sector recorded its strongest result since 2023, with €59 billion invested, reflecting growing engagement from institutional capital. Around two-thirds of investors currently allocate 20% or more of their portfolios to residential assets, and 96% expect to increase this exposure over the next five years.
Return stability remains the main attraction for 74% of investors, supported by solid demographic fundamentals and consistent demand across all residential segments. The Private Rented Sector (PRS) and Build-to-Rent (BTR) continue to lead market interest, followed by Purpose-Built Student Accommodation (PBSA). At the same time, growing interest is being seen in segments such as affordable housing and co-living, as investment strategies become more diversified.
According to Patrick Hogan, Head of EMEA Living Capital Markets at Cushman & Wakefield, “What stands out most in this survey is the consistency of investor confidence. Allocations are increasing, strategies are expanding, and residential investment is becoming structurally embedded in portfolios. The sector’s strong performance in 2025 clearly reinforced this conviction.”
More stable macroeconomic sentiment
Before the current conflict in the Middle East, investors’ macroeconomic expectations pointed to greater stability. More than half do not anticipate changes in interest rates over the next year, while 48% expect prime residential yields to remain stable. Expectations of yield compression have continued to decline, with investors increasingly believing that future performance will be driven mainly by rental growth and operational efficiency.
PRS/BTR is expected to be the best-performing segment in 2026, ahead of PBSA. However, investors identify limited availability of opportunities, ongoing pricing misalignment between buyers and sellers, and political and regulatory risks as the main challenges.
Core markets remain unchanged
Germany, Spain and the UK continue to be the most attractive markets, reflecting the scale of their institutional markets and strong demand for rental housing. Together, the UK and Germany accounted for 66% of European residential investment in 2025. Ireland has now moved ahead of France in the next tier of preferred markets, signalling modest shifts in investor sentiment.
Stabilised assets dominate investment strategies
Investors continue to prioritise stabilised assets: nearly half indicate that between 80% and 100% of their active portfolios consist of this type of asset. This preference reflects the relative youth of the sector and the challenges faced in recent years, particularly rising construction costs, which have increased the risk associated with new developments.
Over the next one to three years, joint ventures and direct acquisitions of stabilised assets are expected to remain the main routes into the market. Forward funding and forward purchase models are likely to remain more limited, except in emerging markets such as Belgium, Italy, Poland and the Czech Republic, where institutional supply is only now beginning to scale up.
When assessing PRS and BTR projects, location is the most decisive factor, followed by affordability for tenants. Amenities and sustainability criteria are also relevant, but secondary to the factors that underpin rental performance.
According to Álvaro Forero, Head of Alternatives & Living at Cushman & Wakefield: “In Portugal, the student accommodation sector entered 2026 with very solid fundamentals, supported by limited supply, growing demand and increasing institutional interest. This context makes the market particularly attractive for investors focused on stable long-term income. The build-to-rent segment, while still underdeveloped, may benefit significantly from the recent fiscal framework, which could act as an important catalyst for its future growth.”
Sustainability remains central to investment decisions
Sustainability continues to be a core pillar of investment strategies: 82% of investors identify it as a key objective, and most are willing to pay a premium for assets with strong environmental performance. Nevertheless, investors acknowledge that sustainability currently carries less weight in tenant decision-making, helping to explain why it ranks behind location and affordability in project assessments.
